American Apparel's Dov Charney Addresses Sexual Harassment Accusations, What Led the Company to Near-Bankruptcy and Their Plan to Get Back on Track Financially

One of the biggest fashion topics of discussion this year (and the past few years) was American Apparel and its controversy-laden founder and CEO Dov Charney. Since January, Dov and his company have been through a lot. On the controversy end, they've showed pubes and boobs in their steadfastly NSFW ad campaigns, faced several very public sexual harassment accusations, held a plus-size modeling competition with a messy outcome and lost an employee to an industrial knitting machine, to name a few of the stories we can recall. In terms of business, they've come within inches of bankruptcy, received a $15 million cash injection from a group of Canadian investors, and announced a few efforts to get back on track like launching denim, selling through eBay and Bloomingdale's and offering third-party merchandise.
While we've all heard about AA's downtown L.A. factory, great wages, and vertically integrated business model, we're still left with questions about why they've struggled so much and what really goes on inside that company--many of which are finally answered in an in-depth piece in the latest issue of fashion glossy Flaunt. Matthew Bedard visited Charney both in Toronto for a company event and AA's L.A. digs and sheds a light on the company's most prevalent issues, including the sexual harassment allegations, financial problems and new plans, manufacturing in the U.S. and more. Click through for the most interesting things we learned (and the most incendiary things Charney said).

While we've all heard about AA's downtown L.A. factory, great wages, and vertically integrated business model, we're still left with questions about why they've struggled so much and what really goes on inside that company--many of which are finally answered in an in-depth piece in the latest issue of fashion glossy Flaunt. Matthew Bedard visited Charney both in Toronto for a company event and AA's L.A. digs and sheds a light on the company's most prevalent issues, including the sexual harassment allegations, financial problems and new plans, manufacturing in the U.S. and more. Click through for the most interesting things we learned (and the most incendiary things Charney said).

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Charney, speaking about this year's onslaught of sexual harassment charges, compares them to a gay man being hassled for having gay sex...we think. He just likes to fool around with girls:

It’s getting strange, you know? Things are strange. Like, at our company, we’re all about gay rights--everyone’s sexuality is human. But, there’s still the conservatives, the scared people, just looking for a little enemy, looking for new sexual things to clamp down on. But we don’t want to fall into that trap--only talking about sex--because the larger message gets lost. The problem with me is that my personal sexuality, or whatever, has been used against me, and it’s taken away from our ideas. It’s like a great gay guy had fantastic ideas, it’s 1964 and everybody’s like, ‘Geez, geez, he screws guys in the asshole.’ Yeah, he screws guys in the ass...so what? I like to fool around with girls. Get over it.

American Apparel models and employees can't have plucked eyebrows because Charney doesn't like them. Iris Alonzo, one of the company's two creative directors, who occasionally appears in ad campaigns, said:

For instance, Dov will say something like, ‘Girls are over-plucking their eyebrows. It’s gotten out of hand.’ So we start using girls who pluck their eyebrows less, which turns into people at the store telling the employees to keep it natural--they’re little things that grow into a look, a distinct aesthetic. None of our models have plucked eyebrows now.

Alonzo also refutes the sexual harassment claims and defends the power of females in the company:

That anyone would try to exploit and jeopardize a company, just for money and attention--and that is what the claims have turned out to be--well, it’s just really sad. We work side by side with Dov every day, which is why the sexual harassment suits are so infuriating. It’s only when I read that people think we are ‘a bunch of men making all the decisions’ that it hits me--the misperception. In fact, 65% or more of our management is female, and we’re an empowered workforce. I don’t know if that’s rare. I don’t know the norm.

Charney vaguely blames the company's problems on immigration setbacks. He says of the recession:

Things happen, right? But we basically made it out of the tunnel. We had issues--the United States government immigration. Things came up, triggered issues with our ability to generate profits, triggered some issues with some of our banks and lenders, triggered some issues with our ability to finance our company. Well, we got through it all. We’re through the tunnel, big deal, couple scars brushed off. Everything will heal.

Here is the company's plan to get back on track financially and the revenue goals they have set, as explained by Charney:

This year, we’re going to make 20 million dollars of EBITA--you know, earnings before interest, taxes, depreciation, amortization--and next year we can make 40-50 million and get back on track. I think in the course of a number of years, we can be making 100 plus EBITA. And to me, that’s a respectable business. And to be cash flowing those kind of dollars.

Charney thinks manufacturing should and will be brought back to the United States in the future, feels American Apparel is a cult:

We are committed to pursuing a contrarian point of view. In my opinion, manufacturing within the United States close to the distribution center is an avant-garde point of view--but some people may not understand that. By hiring people that are in the company, that understand the benefits of that is less explaining to do. That allows us to kind of create a cult that allows us to pursue the contrarian point of view without distraction.

You can read the full piece here. Does this change your view on AA or Charney in any way?

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So, not sure if you'd heard, but American Apparel hasn't been doing so well financially over the past few years. Somehow, though, despite the fact that the company has been tangled up in millions of dollars in debt that is only increasing, CEO Dov Charney raked in almost twice as much money in 2011 than he had the year before.

Despite the fact that his company's been on the brink of bankruptcy for some time--and never mind those pesky sexual harassment accusations --Dov Charney has just been signed to another three-year contract as CEO with American Apparel, according to WWD.
Even with the $80 million lifeline American Apparel recently received from George Soros-backed Crystal Financial LLC and and Salus Capital Partners LLC, American Apparel may still be destined for bankruptcy because that deal came with a high interest rate of 9.5%, adding to the company's already crippling debt. (They owe a whopping $116 million to London-based Lion Capital, at an interest rate of 18% per year.) Ouch.
So it's somewhat surprising to learn that Charney is still raking it in:

In the last month, five former American Apparel employees have come forward claiming sexual harassment against the company's founder Dov Charney. 20-year-old Irene Morales filed suit in early March, seeking $260 million in damages. On Wednesday, the New York Times reported that a second sexual harassment suit was being brought against Charney on behalf of four former American Apparel employees: Kimbra Lo, Alyssa Ferguson, Marissa Wilson and Tesa Lubans-Dehaven. The same lawyer, Eric Baum, is representing all five girls in both suits.
Today we spoke to a source who knows Lo, as well as several of the other women. According the source, Lo worked for the company for seven months and left in May 2010. The source calls these group of women "estranged groupies" who are using this as a "way to get rich quick. They all know Dov, whether platonically, or not. Or in the case of Irene, she was practically stalking him." When asked why these women might want to do such a thing, the source said. "It's a way to get rich quick. Kimbra has a history of getting involved with high profile men, and this is her cash-out."
Another source remarked, "All made threats of some sort not only to Charney but to other American Apparel employees like the photographers, etc. that if they didn't get more money and attention, they would go public with a fake lawsuit. As of now, they have no evidence. This is a civil matter, not a criminal case, which is what people don't understand. They won't get a dime."
It seems other folks are out to leak their own "smoking gun" photos and bits of gossip. We've been bombarded by anonymous tipsters leaking information about Kimbra Lo's personal life and now extremely NSFW emails alleged to be from Irene Morales to to Dov Charney have appeared on two blogs--kimbralo.blogspot.com and alyssaferguson.blogspot.com. More photos of Lo with Olivier Zahm are featured on these blogs, as well as Lo's alleged spread for hipster porn mag Jacques. Gawker received similar tips, including additional emails alleged to be from Morales to Charney, one of which is a list of American Apparel birthday items she wants, dangling this as bait: "do it for all those delicious blowjobs I would give you, and how I would lick your little asshole clean!!! And how I would love to do it again when I see you!"

Watch out, America. Dov Charney is taking a road trip. He's traveling through the South as we speak, and is obviously trying to convince everyone that American Apparel is staging a comeback/recovery. He's been in the media a bit lately--like that extended interview he did with Flaunt, telling the indie mag that American Apparel was going to make $20 million in earnings before interest, and was on track to double that in 2012.
WWD caught up with Charney in Texas, where he told the trade, "We're getting our groove back a bit." But are they? Let's review the company's recent financial history.